Labourers walk through parched land in Tripura. India’s most important food crop producing states are staring at a drought-like situation.(REUTERS / Representational Photo)

A poor monsoon in nearly 40% of the country is fast turning into a worry for India’s economy this year, with experts warning of a fall in food crop output that could hurt rural demand, aggravate farm distress and push up inflation.

The IMD said on Friday that monsoon rains were normal in only 44% of the 660 districts it maps for rainfall. More than half of Punjab, Haryana, UP and MP – among India’s most important food crop producers, stare at a drought-like situation.

Agriculture ministry’s data till the week ended September 8, 2017 showed a 25 lakh hectare drop in the area sown with rice, pulses, coarse cereals and oil seeds. Though, the overall gap between last year and this year’s sowing was only 8.7 lakh hectares, down from 1,049.87 lakh hectares in 2016-17, since farmers chose to sow more of sugarcane and cotton.

Experts say states like Punjab and Haryana do not depend entirely on rain since farmers have access to ground water for irrigation. But tapping into those sources significantly raises input costs.

Inflation is already lurking close to the Reserve Bank of India’s target ceiling of 4% — figures released this week showed retail and wholesale price inflation at the 3.2% mark — highest in four months. If it goes any higher, it will deter the RBI from lowering interest rates, crucial to kick start spending. India’s economic growth plummeted to 5.7% in the first quarter of this year compared to 7.9% in the same quarter last year.

These worries were reflected in a report by State Bank of India’s research wing that predicted a drop in food grain production, and appeared in line with official rainfall and sowing data.

“Agriculture growth will be muted as rainfall in the first three months of monsoon was hugely deficit in key food grain producing states like Uttar Pradesh, Punjab, Haryana, and Madhya Pradesh,” SBI’s group chief economic adviser Dr Soumya Kanti Ghosh said in the bank’s publication SBI ecoflash.

The outlook came days after Japanese think tank Nomura Research made a similar prediction analysing a fall in sowing of pulses and oil seeds. It attributed the trend to a decrease in wholesale prices in July.

But, the government said that food grain production will not be hit. “The yield is expected to be same as of last year. There is no drought-like situation,” it said in a detailed press release countering earlier reports of a looming threat of drought in 225 districts of the country.

The government said on Thursday it is “closely monitoring the agricultural situation in the states.”

“The Ministry of Agriculture & Farmers Welfare has already given advisories to the States for life saving irrigation, in case of moisture stress. Though, there is deficit rainfall reported in 95 districts but sowing is normal and satisfactory. The current rainfall in first fortnight of September in many States will improve the situation,” it said.

The ministry’s national crop forecasting centre (NCFC) releases an assessment of drought indicators. In the latest report released on Wednesday, it said that 225 of the 550 districts it assesses in 17 agriculturally important states showed the first trigger for drought assessment (deficit rainfall) as positive.

Of the 225, 58 districts in nine states have been listed as “districts with rainfall trigger yes and at least 1 indicator severe or moderate.” These areas include nearly half of Punjab, parts of Haryana, Maharashtra, Karnataka, MP, UP, Tamil Nadu, Assam and Rajasthan.

“Growth rate in agriculture could be around 2.5% in 2017-18,” Ashok Gulati, agriculture chair professor at Delhi-based Indian Council for Research on International Economic Relations told HT. Barring last year, in which agriculture grew at 4.9%, the sector has shown less than 2% growth under the current government, he said.